Battle Between Ethanol and Pork May Cause Corn Shortage

The only place in Iowa where you'll hear someone complain about ethanol is inside the swine barn at the Iowa State Fairgrounds.

A large international turnout is expected here this week at the World Pork Expo. Hot topics include pushing for free trade with Panama, Colombia, and especially South Korea.

News that the federal government says it's safe to cook pork and leave a little pink in the middle opens up menus to better tasting recipes and perhaps better sales. And then there's all the new equipment on display, including the latest machines that take pigs from this life to the next—like one called the Ecodrum—"Animal Mortality Management."

Photo by Jane Wells for CNBC.com

Ecodrum

The hottest topic, however, is the price of corn. Thursday, the USDA updates its outlook on this year's corn crop, the first update since flooding delayed planting.

"In all previous years where corn planting was less than 90 percent complete by the end of May, final corn acreage came in short of March 31 planting intentions," says a report from Scotia Capital. "On May 29, corn planting was only 86 percent complete."

Which leads to the big beef between hogs and ethanol. Both are competing for corn, and after September, there may not be enough to go around.

In its defense, the ethanol industry highlights the fact that after it extracts what it needs from corn, it sells the residual product back to the livestock industry as a nutritious, concentrated feed (though it contains less energy). This residual is called Dried Distillers Grains, or DDG.

Dr. Paul Sundberg

Dr. Paul Sundberg of the National Pork Council, with CNBC's Jane Wells.

"DDGs is nothing new," says Dr. Paul Sundberg of the National Pork Council. But the feed has become so popular it's reached "another plane of use." That has highlighted a difference between pigs and cows—and that's a problem.

Cows have four stomachs, they digest the DDGs with no apparent issues.

Pigs have one stomach. Hog farmers and meat packers are discovering that pigs don't process the DDGs the same way, and too much of the stuff in the diet affects the meat. The fat in the bacon doesn't hold up as well. The color changes.

Packers are telling farmers to limit DDGs in pigs' diets, or else.

So now hog farmers have one more reason to complain about ethanol. Though some aren't complaining too loudly in Iowa this week. That's because many of them also grow corn—and even sell it to ethanol plants.